Title: Geopolitics%20of%20the%20New%20Europe
1Geopolitics of the New Europe
David Chelly ESCEM 2nd YearstudentsBusiness
Management in the New EuropeMinor
4/5-7/2005
2Aims of the seminar
- This course provides students with an
introduction to the Eastern European business
environment in a context of political, social and
economic reform and European Union enlargement. - This course may interest young graduates, as
Central and Eastern European countries offer
excellent job opportunities for western European
students in management - Students are introduced to specialized research
sources, which may be useful to them in their
careers - The documents of this course are fully available
through the internet, in English and in French,
at the web address http//www.centreurope-us.org
3Your instructor
- David CHELLY
- Ph.D in Management Sciences, post-graduate
diploma in Finance, degrees in Money and Banking,
Law, Accounting and Sociology. - Head of a consultancy firm and a website
(http//www.centreurope.org) specialized in
business with Central Eastern Europe - Professor of management in various business and
engineering schools
info_at_centreurope.org
4The courses outline
- Central and Eastern Europe basics - The
transformation process The enlargement
challenge - An economic overview - Nature and extent of
Foreign Direct Investments
5I. Central and Eastern European basics
6Discovering Central European countries focus on
Latvia
7A rich and ancient history
- It is not because we dont know Central and
Eastern Europe history that these countries do
not have any history. - Almost all CEE countries have played a major role
in Europe in their history - But they have early fallen under the domination
of different empires, which have shaped their
future
Cyrille and Méthode, inventors of the Cyrillic
alphabet
Charles the IVth (1346-1378), King of Rome and
Empereur of the Holy German Empire
8The empires and their influences
- Long dominated by the Habsburg Empire, the
history of Central Europe has been marked by
education, art and modernism. - While in 1789 in France only a third of the
citizens were able to speak and read French (the
rest spoke local dialects), education in German
had been compulsory for a century in the whole
Kingdom - Eastern European countries used to live under the
Ottoman and the Russian Empires rule, which
prevented their economic development.
Vlad Tepes (1428-1476), a Romanian figure of the
struggle against the Ottoman Empire.
9Exercise Central and Eastern European countries
on the map
10Central and Eastern Europe map
11The communist heritage
- Central and Eastern European countries have lived
forty (seventy) years of communism, which still
influence local behaviors and habits.
The communist heritage Corrupted civil servants,
unreliable businessmen, opportunist politicians
12Young democracies with unstable governments
- Local democracies suffer from a lack of political
maturity. - Demagogue politicians are elected on the basis of
their unrealistic pledges - The leading coalitions are not able to keep the
power due to a too large number of political
parties and to political scandals
But the political risk is limited to only a few
countries in the CIS and in the Balkans
13Geopolitics of Europe focus on the Orange
Revolution
14Ailing institutions
- Central and Eastern European states suffer from
bureaucracy and corruption - Most institutions (The Police, Universities,
Hospitals) in Central and Eastern Europe are in
crisis - Income inequalities and regional discrepancies
are widening - Eastern Europe faces a serious demographic
problem.
15An inefficient legal framework
- In Central and Eastern Europe, the legal
frameworks are very similar to those of Western
Europe. - But in practise, the legal environment is a
jungle. Law are - Incomplete (lack of case law, decrees)
- Volatile and contradictory
- Not enough enforced
On the main square of Sofia, one can buy the most
recent and expensive software CDs for a few
dollars.
16The communist era and the transition The movie
Kolya
17Towards a stronger Europe
- A group with 25 countries offers a stronger
opposition to the other world powers - The USA will endeavour make the enlargement fail
- The EU must adjust itself to the enlargement
- Is it able to ?
- How far can we go ?
18A difficult task to achieve
- A few international disputes are not solved yet
- Borders in central and Eastern Europe have more
been designed according to the side chosen by the
countries during the two World Wars rather than
according to the human realities. - The first relationships between ancient and new
EU members are marked by conflicts - Reciprocical expectations from ancient and new
members strongly diverge
Will they get along together ?
19Exercise sub-groups in Central and Eastern
Europe
- You are a consultant with the French Center for
External Trade (CFCE). Your task is to promote
business relationships with Central and Eastern
European countries. - Up to now, the CFCE had grouped the countries of
this region in a category called  Pays de
lEst ( Eastern countries ). - Until 1991, the region used to comprise eight
countries Albania, Yugoslavia, Bulgaria,
Romania, Hungary, Czechoslovakia, Poland, and
USSR. But now they count up to more than twenty. - Your mission is to split them in different
subgroups, that should be geographically close
and economically homogeneous. Explain your
decisions. - The countries are Albania Armenia Azerbaijan
Byelorussia Bosnia-Herzegovina Bulgaria Croatia
Estonia Georgia Hungary Latvia Lithuania
Macedonia Moldova Poland Czech Republic Romania
Russia Serbia-Montenegro Slovakia Slovenia Ukraine
20II. An economic overview
21A rich Central Europe
- Central Europe is mainly composed of reformed
Catholics, close to the Protestants in terms of
seriousness and rigor. - Central Europe comprises the former Eastern block
countries that previously belonged to the
Habsburg and Prussian Empires, but also Germany,
Switzerland and Austria
According to M. Kunderas  The Stolen West or
the Tragedy of Central Europe (1983)Â , Central
European countries culturally belong to Western
Europe.
22An under-developed Eastern Europe
- Eastern European countries are mainly
economically under-developed. - None of them have until now successfully managed
their economic transition to capitalism. - The religions are orthodox and Muslim.
23Exercise (4/6/2005) What are the strong points
of Central and Eastern European economies
24An generalized improvement of the economic
performances
- After a deep collapse of their GDP, Central
European countries have been achieving steady
economic growths, followed by most Eastern
European countries - Hyper-inflation had severely hit most CEE
countries - But this issue is today under control
25The new economic challenges
- Unemployment has risen above average European
standards. - Public debts have dangerously grown
- The consequence is high interest rates, which
prevent all economic development. - Commercial deficits are found in most CEE
countries. - The values of the currencies tend to decline,
which impoverish these countries and put them
under the threat of speculators
Georges Soros a real philanthropist?
26Restructuring and current situation of financial
and production systems
- Privatisations of banks and companies are well
advanced - But the industrial restructuring is still
unsufficient - Central and Eastern European economies move
towards less industry and agriculture and more
services - Central European traditional sectors are not
competitive in the new international division of
labour - But these countries develop new competitive
advantage
27Why invest in Central and Eastern Europe ?
- Foreign direct investments in all sectors and
from all countries are welcomed and little
restricted. - Central and Eastern European countries benefits
from a cheap and qualified workforce and an
advantage of territorial location - Investment incentives are offered for
Manufacturing investors. - But the main reason for FDI is good access to
domestic and foreign markets
28A strong demand for Western products
- Local consumers ask for western products.
- They are fascinated by the consumption society
and relatively under-equipped.
Each unveiling of an hypermarket is celebrated by
hours of queues of avid consumers.
29Unsaturated B2B and B2A markets
- Local companies urgently need comprehensive
updating of equipments/technologies and
restructuring their organization. - The local supply is unable to provide these
services. - Local public authorities lack of everything
- Services of public utility (environment,
education, culture) constitute a huge market,
often financed by the EU.
30Exercise (4/6/2005) which European country does
offer the best opportunities for French exporters
and investors?
31Marketing products in Central and Eastern Europe
- Little adaptation to the products is necessary.
- Local consumers are price-sensitive and crave for
presents, prizes - The distribution sector is very atomized.
- Direct marketing has thus become a common way to
distribute products. - Consumers are receptive to media and off-media
campaigns.
32TV ads in Eastern Europe
33Where and how to invest ?
- A few countries attract the majority of FDI,
mostly in the services sector - In Eastern Europe, some large companies are
scheduled for privatisation, but the best deals
have long been done - Joint ventures and licensing also offer limited
opportunities - The most profitable way of investment is the
Greenfield investment - Good personal relationships are crucial to
succeed in Central and Eastern Europe
34Managing people
- In Central and Eastern Europe, the workforce is
cheap and qualified, especially in technical
fields. - But commitment, sense of initiative and ethics at
work are low - Â pretend to pay us and we will pretend to workÂ
- Â the one who does not steal, steals his familyÂ
(Czech proverbs)
35HRM strategies
- Two HRM strategies coexist in Central and Eastern
Europe - A culture-free model based on the global best
practices - Corporate cultures must be stronger than national
cultures. - A cross-cultural management model based on
contingent strategies - Different environments, cultures and attitudes
towards work lead to different practices
corporate communication, pay systems, HRM
36More information
D. Chelly F. Lafargue, Guide culturel et
d_at_ffaires pour lEurope de lEst, LHarmattan,
2003
www.centreurope.org East-west business portal